This volume introduces the mathematical analysis of probability theory and its application to financial market modeling. It covers measure-theoretic probability, distribution theory, the limit
laws, and continuous-time stochastic processes, as well as applications in modeling state securities under market equilibrium. It discusses the martingale, equivalent martingale measures, the
fundamental theorems of asset pricing, the change of numéaire and discounting, risk-adjusted and forward-neutral measures, and hedging using contingent claims, Markovian models, and the
existence of martingale measures preserving the Markov property. It also covers stochastic calculus and multi-period financial asset pricing models leading to no-arbitrage pricing of contingent
claims; the theory of risk aversion and utility; the theory of Markov chains and its applications to credit risk modeling; and optimal consumption and investment problems and interest rate
modeling. This edition has three new chapters on Merton’s continuous-time asset pricing model, Brownian motion and technical trading, and risk measures. Annotation ©2016 Ringgold, Inc.,
Portland, OR (protoview.com)
